Adcorp clients respond to turbulent labour market

“While COG and Capacity performed in line with expectations, there were mixed fortunes. Both businesses lost volume to certain clients automating and mechanising previously labour-intensive processes but were able to more than recover these lost volumes elsewhere by way of market share gains,” [DATA ADR:Adcorp Holdings] said.

“This move to automation and mechanisation is reflective of employers responding to a turbulent labour market which is characterised by militant strike action in pursuit of above-inflationary wage demands, the threat of new, cumbersome labour legislation and economic uncertainty in a relatively lacklustre economy.”

The diversified workforce management and business process outsourcing company, which has a number of operations including ADfusion, Capacity Outsourcing, Capital Outsourcing Group (COG), Charisma, FMS, Quest and Staff U Need (SUN), also saw growth in its full year revenue.

Group revenue for the year ending 28 February 2014 grew 37 per cent to 11.8 billion rand from 8.6 billion rand for the same period in 2013.

“The blue-collar operations continued to perform particularly well. Specifically, SUN had an exceptional year. The white-collar contracting and permanent recruitment businesses were generally flat year on year,” said Adcorp.

“Business process outsourcing (BPO) businesses reflected an overall year-on-year decline in profits which was largely as a result of the pricing pressure in the business of FMS. This decline was partially offset by the solid performance of the financial services business.”

Operating profit for the group increased from 285 million rand in the 2013 year to 301 million rand in 2014. However, the company itself reported an operating loss of 108 million rand from a loss of 17 million rand in 2013.

The group’s profit before taxation increased to 256 million rand in 2014 from 232 million rand in 2013 while headline earnings dropped to 175 million rand from 186 million rand.

Diluted headline earnings per share for the group decreased from 221.1 cents in the 2013 year to 176.4 cents in 2014.

“The outlook for growth in employment in South Africa and Australia remains relatively lacklustre, while the rest of Africa and Asia hold far more promise with regard to general employment prospects. These macro trends aside, the group is well positioned strategically and should benefit from the following industry-specific and micro trends,” Adcorp said.

“For quite some time, the group’s South African staffing operations have been the subject of much speculation regarding proposed changes to labour legislation aimed at restricting the use of contract workers. The proposed changes to the Labour Relations Act should generally be positive for the business although potentially negative for employment prospects in South Africa.”